What Happened:
Shares of leading designer of graphics chips Nvidia (NASDAQ:NVDA) jumped 5.17% in the pre-market session after Wall Street analysts continued to project huge gains in the artificial intelligence market, and the market similarly continues to understand the potential scale and runway of the opportunity. Sentiments continued to improve as the market digested the outstanding first quarter results and guidance. In addition, the company announced several AI initiatives, such as a collaboration with WPP to create an AI-powered content engine, NVIDIA Spectrum-X™, a platform that boosts the performance and efficiency of AI clouds based on Ethernet, and a new NVIDIA DGX™ supercomputer that can handle large-memory AI models for generative language applications.
What is the market telling us:
Nvidia's shares are very volatile and over the last year have had 36 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. The previous big move was six days ago, when the stock gained 23.7% on the news that the company delivered an exceptional quarter that topped analysts' estimates across key metrics. Revenue surpassed expectations by an impressive 10.3%, driven by strong data center revenue. Notably, the company improved profitability, with both gross margin and operating margin outperforming expectations. Earnings per share (EPS) beat by an impressive 18.8%. Inventory levels experienced a nice decrease during the quarter. In addition to the outstanding quarterly results, the revenue guidance for the next quarter surpassed expectations by over 50%. Yes, that's not a typo. Similarly, the operating profit guidance exceeded Consensus estimates meaningfully. Founder and CEO Jensen Huang emphasized the ongoing transformations in the computer industry, particularly the advancements in accelerated computing and generative AI. He highlighted Nvidia's readiness to seize the opportunities presented by the anticipated trillion-dollar shift in global data center infrastructure from general-purpose to accelerated computing, as firms implement generative AI into their business operations. Overall, the company's blowout quarter, with its impressive revenue growth, enhanced profitability, and positive guidance, underscored its strength in the market. Nothing in this world is perfect, but this was a near-perfect quarter.
Nvidia is up 188% since the beginning of the year. Investors who bought $1,000 worth of Nvidia's shares five years ago would now be looking at an investment worth $6,520.
Is now the time to buy Nvidia? Access our full analysis of the earnings results here, it's free.